The molecular pathways leading to DNA repair upon damage are not well understood. In the immune system, B and T cells undergo a variety of DNA modifying events, such as recombination and hypermutation, which require the activity of a variety of DNA repair enzymes. Both recombination and hypermutation are intermediate mechanisms in the processing of cell surface receptors in B and T cells. These receptors are absolutely required to the proper functioning of lymphocytes. Thus, animals or humans deficient in B and T cell receptors are completely immunodeficienty and succumb to infections quite readily. Unfortunately, DNA damage can also lead to translocations and malignancy in lymphocytes when improperly repaired. For instance, mammals lacking ATM, a key enzyme in the repair of DNA damage in lymphocytes, develop T cell lymphomas early in life. To investigate the molecular pathways involved in DNA repair we are making use of confocal microscopy. By labeling DNA repair enzymes, histones, and DNA polymerases with yellow and cyan fluorescent proteins (YFP and CFP) we are able to visualize the kinetics of DNA repair in living cells. With this new approach, we have identified a new role of ATM in the processing of DNA double-stranded breaks. We found that upon DNA induced damage, ATM quickly downregulates transcription at sites near the lesion. Both in cell lines and primary cells we found that gene transcription continues in the presence of broken DNA. Providing that the transcription machinery interferes with the processing of DNA ends, our results provide a rationale for the impaired recombination and the frequent translocations observed in ATM-/- lymphocytes.